Market Talk
– The US dollar was pinned below recent highs on Wednesday by a decline in real yields and by trepidation ahead of a Federal Reserve meeting, while other safe-haven currencies were in favour following an unnerving plunge in Chinese equity markets.
– U.S. consumer confidence inched up to a 17-month high in July, with households’ spending plans rising even as concerns about higher inflation lingered, suggesting the economy maintained its strong growth clip early in the third quarter.
– The Chinese yuan fell towards a three-month low against the greenback after recording its worst day since October 2021 on Tuesday as concerns over a recent Chinese crackdown remained firmly in place. The crackdown on tech and other lucrative sectors also saw jitters spill over into the U.S. market on Tuesday
– The Aussie dollar stayed low as a plunge in Chinese equity markets sent investors scurrying for perceived safe haven assets. Also clouding the outlook for the Aussie was a four-week extension of a coronavirus lockdown in Sydney, raising prospects of a third-quarter economic contraction and higher unemployment.
– Gold was up on Wednesday morning in Asia, remaining close to the key psychological $1,800 mark as the dollar softened and U.S. real yields plunged, though gains were limited by investor caution ahead of a Federal Reserve meeting that could provide details on stimulus tapering.
Chart Focus EUR/USD
Key Points
1. Buy EUR/USD recommendation
2. Buy EUR/USD at 1.1805. Stop at 1785 and profit target at 1.1880.
3. Investors’ caution and a decline in real yields are both weighing on the US dollar
4. Price is supported by a rising 20EMA with momentum indicators hinting of a bullish price trend ahead.
Fundamental Comments
1. A decline in real yield is weighing on the US dollar
2. Investors’ caution ahead of a FOMC is likely to weigh on the US dollar
Technical Comments
1. Price is likely to be supported by the rising 20EMA after hitting a bottom last week at 1.1750
2. MACD remains bullish and Stochastic continues to rise into the overbought zone. Both momentum indicators are hinting of a bullish price trend ahead.
Key Levels
| Support | 1.1800 | 1.1780 | 1.1750 |
| Resistance | 1.1840 | 1.1885 | 1.1915 |
Technical Overview
USD/JPY – We had a sell recommendation yesterday at 110.25 but price only reached a high of 110.15 and our recommendation was not filled. Stochastic has reached the oversold zone but looks weak. MACD remains bearish and is hinting of a bearish price trend ahead. 20EMA remains bearish. We think price is likely to continue lower to 109.40 in the next 48 hours.
| Support | 109.60 | 109.30 | 109.00 |
| Resistance | 109.95 | 110.30 | 110.70 |
AUD/USD – We had a sell recommendation Monday at 0.7360 which was filled and we had recommended placing stop at 0.7405 and profit target at 0.7290 yesterday. Price has been caught in a Triangle trading range of 60 pips for the past 3 days. MACD and 20EMA are flat and neutral. Stochastic is in the middle of its range. We could recommend exiting the position at current price level of 0.7362 for a small loss
| Support | 0.7350 | 0.7310 | 0.7285 |
| Resistance | 0.7380 | 0.7410 | 0.7440 |
GBP/USD – Price continues its rally to a high of 1.3894 overnight and negated our bearish view. Price may have reached a high with MACD showing a bearish divergence signal on the 4-hourly chart. This is a warning of a potential price high. Stochastic is also in the overbought zone but 20EMA is pointing higher with a steep slope, hinting of a strong bullish trend. We think the topside may be limited and would prefer to wait for a bearish signal to get into a short position.
| Support | 1.3860 | 1.3830 | 1.3785 |
| Resistance | 1.3895 | 1.3940 | 1.3990 |
XAU/USD – Price has moved above last night’s high $1805.20 and could be heading higher towards the next resistance at $1814. However we think price is likely to range in this week’s range of $1793.55 to $1814. Powell’s speech after FOMC could determine the breakout. MACD and 20EMA are both neutral at the moment. Stochastic is rising and in the middle of its range.
| Support | 1802.10 | 1793.55 | 1784.55 |
| Resistance | 1811.45 | 1824.80 | 1833.95 |
XAG/USD – We had a sell recommendation at $25.30 last Thursday and yesterday we had placed stop at $25.60 and profit target at $24.75. Yesterday, price declined to a low of $24.48 and we are out with a $0.55 profit. MACD is warning with a divergence and hinting of a potential low. Stochastic has a bullish crossover. Both momentum indicators are hinting of a likely price rally.
| Support | 24.65 | 24.45 | 24.05 |
| Resistance | 24.90 | 25.25 | 25.50 |